Member Info for BouncyDeadCat

Not for LLOY, it's a perpetual dog of a share. Hasn't gone anywhere in 14 years.

Jimmy,

Okay, so if Predator's 10 mmcf per day Moroccan onshore project is being valued at over $71m net to the company (Predator's valuation is only 18% behind this today), then 4x this for Chariot at 40 mmcf per day would equate to a net value of $280m which pretty much equates to the additional 27p per share.

Predator Oil & Gas value their Moroccan onshore project (which is 1/10th the size of Anchois at 10 mmcf per day) at over $71m net to the company. And even without a farm out / development partner, Predator the company is valued at $58 million. Although Predator have a couple of other assets in other countries, onshore Morocco is the only asset of theirs that is being actively progressed.

Chariot's valuation by broker Cavendish

Assuming Energean exercises its option to acquire a further 10 per cent stake in Anchois, broker Cavendish values the total unrisked valuation of Chariot to be 71p per share for the entire company. They value Anchois alone at 44p (unrisked), this means they are putting a valuation of 27p per share onto the other parts of Chariot's business (Onshore, Hydrogen & Renewables).

As the hydrogen and renewable businesses are still in their infancy, I assume (rightly or wrongly), that the majority of the 27p for other parts of the business is what Cavendish is applying to the unrisked valuation of Chariot's 75% stake in onshore Loukos.

The results of onshore drilling (Jan/Feb 2024) if successful, has the potential to surprise many.

Jimmy,

$8 mcf was the price pre-russian invasion.

Post-invasion, the rate for Moroccan industrial gas has been between $10-$12 and it currently remains above $11 mcf.

Gooner,

On spud day Anchois East, I bet you we're above 18p.

To clarify, when I say immediately sell them, I mean immediately sell them at first gas (when the lock up period ends).

If Energean elect to proceed and acquire the further 10% of Anchois, Chariot will receive one of the following:

I. 5-year, $50 million of convertible loan notes with a GBP20 strike price and 0% coupon; or

II. 3 million Energean plc shares, issued immediately upon exercise of the option but subject to

a lock-up period until the earlier of first gas and 3 years post FID

If they opted for the non-lock in period of 3 million Energean shares (currently valued at $36 million) they could, in theory, immediately sell them and pay back a chunk of the $170 million in carried cost early. Interestingly, these shares also come with a 10% dividend.

SP reaction has little to do with absent flowtests. Reservoir quality is excellent with excellent porosity. Flowtesting is more of a formality at Anchois.

The terms for this great farm out deal are dependent on the next drill. This is what the market doesn't like. Is the read-through data going to be as accurate as everyone thinks? Next drill will confirm as it's in a different location.

'planning to halt lending to some new oil and gas projects'

Choosing to employ such strategies as defunding oil & gas developments makes my mind boggle. It's only going to make the stuff more expensive and the companies that produce it more profitable.

Correction, I meant to say high yielding commercial bonds, not paper. i.e. B grade or junk bonds that yield about 8.31%.

Hi Jimmy,

I'm not so sure. High yielding commercial paper is currently being issued at around 6-7% and what Chariot were offered from Energean was a better deal than what the banks lead by SocGen could offer them under a debt finance agreement (which would have also come with recourse clauses).

Fernan,

The RNS states that the cost has a coupon of 7% over the SOFR rate, not in addition too.

With regards the 7% royalty, we don't know any other details other than what it states in the RNS. Like I said, there's no mention of a price difference for when the 7% royalty kicks in. It just says there's a hurdle rate to exceed. With such vague language it's difficult to know.

Fernan,

That doesn't make much sense to me. Firstly, 7% over what if not SOFR?

Secondly, at 12.3% you're almost talking credit card rates, so we'll have to agree to disagree on your interpretation.

Also, nowhere in the RNS does it state any 'difference' in price. It simply states, and I quote “7% royalty payment on Energean's gas production revenues in excess of a base hurdle on the realised gas price (post transportation costs)” This to me implies that if Chariot can sign the GSAs above any such base hurdle rate, then the 7% of Energeans revenues apply. Also, when looking at other O&G deals structured this way, the hurdle rate usually represents the minimum required rate of return set by the partner who's making the investment in the project. i.e. if you can deliver above contracted rate 'X' we will return 'X%' revenue back to you. It's an incentive mechanism. Not only does this kind of structure help protect the farm in partners invested capital, it also secures the minor partner as a continued & active participant in the project negociations and administration rather than being a post farm out free rider who's not going to do anymore work on it.

Jimmy,

The more you look at the structure of the deal you see drivers for incentivising both parties throughout it. Chariot will need to keep working hard on the administrative, technical and exploration side in order to achieve the additional 7% revenue particularly with regards to the GSAs it signs.

I've generally been working on the assumption of 1Tcf @ $10 per mcf for the project, which is somewhat due to these figures simplifying my own calculations as well as what I think it'll take for Anchois to be a viable and thus attractive project to develop (1Tcf).

I also fully accept the entire Anchois/Rissana project could end up being priced anywhere from 7.5Tcf @ $15 per mcf to 638 Bcf @ $8 on a final outcome basis.

I therefore think 1Tcf @ $10 per mcf is reasonably conservative.

For the onshore gas going to power and industry, I'm going to assume a slightly lower rate of $8 per mcf (for the slightly lower grade of gas). Will wait to see what kind of quanitieis they find (or don't) in February before I start to put any revenue forecast together for onshore.

Gooner,

Everyone was hoping for 'an exceptional farm out deal'. What everyone got was 'an exceptional farm out deal on the proviso of 1 more successful carried drill'.

So there's still an element of risk hanging over the final outcome of the deal.

Surety,

The 10% option is meaningfully expensive because the deal very much looks to have been structured that way on purpose. For Energean, there's still a small amount of risk involved in the next drill and the read-through of more gas being correct/incorrect. It looks like they want to be 100% sure. It's my personal opinion that they would like this asset to be a minimum of 1Tcf before they'd be prepared to fund the entire thing.

I have also considered our seller being one of the recent 6%ers giving way. I remember holding a promising AIM tech stock back in 2010 when the only institution also holding it was blackrock. They held a 10% stake and they were... well... blackrock - the largest asset manager in the world by AUM & they held a 10% stake in this promising little AIM tech stock. That's until they sold the lot ~ within the space of about two weeks and the SP crashed to 13p. All the PI's thought something must be very wrong with the company as why would the only institutional investor sell its entire stake?? Talk about lemmings running off a cliff. So many of them sold out in blind panic.

Over the course of the following 12 months the share price climbed to £2 without blackrock or any other insti remaining invested. It was a great lesson in doing ones own due diligence for those who sold in panic and also for those who held or kept buying.

$3 million per exploration/developed well within Loukos (Although Duncan's response was a bit wishy-washy). Page 9 of the below presentation shows the existing onshore pipeline infrastructure already in place that feeds the industrial sector. Gas processing is minimal because it's already relatively clean gas out of the ground and the industry standard doesn't require gas to be as high-purity as the gas delivered into the GME needs to be. This looks like it's going to be the more speedy route to revenue generation for Chariot (providing drilling is a success).

https://chariotenergygroup.com/app/uploads/2023/12/Offshore-Partnering-slides.pdf

I was very busy at work yesterday, so rushed through some of the figures in my head. Here are a couple of corrections involving my previous post...

The interest rate on Chariots share of the carry is not 7%, it's 7% above SOFR which has varied between 3-5% over the last 24 months since inflation hit. It's currently at a peak rate of 5.3% (because interest rates are at a peak). Interest rate cuts are anticiapted to begin in 2024, but if they don't and instead continue to remain at around 5.3%, then 7% above this rate would be 5.67%.

This rate could well be nullified or even succeeded by a 7% royalty payment on Energean's gas production revenues in excess of a base hurdle on the realised gas price.

Important to note: this 7% royalty is set on all of Energeans gas sales revenues which would represent a 55% (not 80%) stake in the asset (if they were to take up the additional 10% post drill). A 7% royalty payment on Energeans 55% stake would equate to a (2.75x, not 4x) compounded revenue uplift for Chariot, which could add up to and extra +19.25% in income from Anchois.

We need to know the minimum required rates of return Energean are looking for on this project to be sure, but if the base hurdle rate is realised, the income share from Anchois could look something like this...

Energean 55% stake - 7% royalty payable to Chariot = 51.15% of revenue from Anchois

Chariot 20% stake +7% of a 55% royalty payment = 23.85% of revenue from Anchois

A note on the 7% royalty payment on all of Energean's gas production revenues to Chariot...

It could increase Chariots revenues from Anchois above 20%.

A 7% royalty on Energeans 80% of revenues re-sized to Chariots 20% stake compounds by 4x.

Indeed Happy.

I also think bringing up Barryroe as a comparison and concerning trolling over flowtests and suchlike is an attempt to sow seeds of doubt. Anchois is nothing like Barryroe and that's why it's been farmed into.

Anchois has been drilled twice. It has really good quality reservoirs and 637 Bcf of discovered 2c reserves.

I think the reason the farm in deal has been constructed the way it has is because Energean need the resource to be 1Tcf in order to make Anchois a new viable producing asset (if offshore infrastructure were already producing nearby, at 637 Bcf, this discovery would already be a viable asset to produce from).

Anchois East has estimated resources of 383 Bcf which, if proven, takes the asset above 1Tcf.

1Tcf is the magic number and if/once they get it there, it completely unlocks the viability of the project.

As I said in my post yesterday, this farm out deal is dependent on the Anchois East drill and that's why it sold off.

The simple explanations are nearly always the right explanations.